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Jewel-Osco's HQ sells for almost $24 million

Feeling more optimistic about the suburban office market, Hamilton Partners added Jewel-Osco’s headquarters to its shopping cart for almost $24 million.

The Itasca-based developer and investor bought the 185,020-square-foot office building at 150 Pierce Road in west suburban Itasca on Dec. 30 for $23.7 million, or about $128 per square foot, according to DuPage County records. The seller was Bethesda, Md.-based pension fund adviser ASB Capital Management.

Hamilton Partners developed the six-story building in 2002 before ASB, its equity partner, bought out the firm a few years later, partner Mark Hamilton said. The price of that deal could not be determined.

This time the roles were reversed, as Hamilton Partners looks to ride the momentum of several recent large leases in its home suburb and an improvement in the overall suburban leasing market. Suburban office vacancy was 22.6 percent in the fourth quarter, its lowest since 2008, according to Chicago-based Jones Lang LaSalle.

BIGGER RETURNS IN SMALLER PLACES

That, combined with a rise in values in downtown Chicago and other big cities, has Hamilton Partners and others seeking higher-percentage returns in the suburbs and in smaller cities.

“We just thought it was a good value,” Hamilton said of the building, which is 90 percent leased. “In the Chicago suburban office market, you're still able to get secondary- and tertiary-market returns. We're going to continue looking in the suburban Chicago market, as well as some other markets. We're currently active in Denver and Salt Lake City.”  A spokeswoman for ASB did not respond to a request for comment.

The sale comes as Jewel-Osco's parent, Boise, Idaho-based Albertsons, merges with Pleasanton, Calif.-based grocery store chain Safeway.

The merger has created some uncertainty in real estate circles about Jewel-Osco's plans for its headquarters, which fill about 85,000 square feet at 150 Pierce, according to real estate data provider CoStar Group. Jewel-Osco signed an 11-year lease in 2008 when it moved from Melrose Park, according to property records.

Hamilton declined to comment on specifics of Jewel-Osco's lease but said “we feel confident that Jewel is going to be a tenant in the building long-term.”

The property previously was occupied by OfficeMax, which moved its headquarters to Naperville in 2006 and last year began shifting its headquarters to Florida after a merger with rival Office Depot.

The sale of 150 Pierce was brokered by Paul Lundstedt, an executive vice president at Los Angeles-based CBRE. The deal was backed by an $18 million loan from Charlotte, N.C.-based Bank of America, according to county records.

SOURCE: Chicago Real Estate Daily

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